Determinants of Dividend Policy in the Saudi Arabia Market

Abstract

This paper seeks to find the determinants of dividend policy of non-financial firms in Saudi Arabia. The study uses a firm-level panel data set of publicly traded firms on the Stock Exchange between 2004 and 2009. Seven determinants have been employed and the data analyzed within the framework of OLS regression technique. The results show that the dividend policy in the Saudi Arabia Market is negatively affected by leverage and risk and are positively affected by profitability, size, and growth. On the other hand, the results show that the tangibility and liquidity have no effect on the dividend policy. Consequently, the major determinants of dividend policy of non-financial firms are profitability, leverage, growth, level of risk and size. In all. the study found support for the profitability theory and agency cost theory, therefore, the determinants of dividend policy that are suggested by research in developed markets can be applied in developing market as well.